North Korea could soon open its doors to FDI, following a recent decision by the country's government to invite German economic and legal experts for consultations, according to reports by German newspaper Frankfurter Allgemeine Zeitung (FAZ). In what could be a radical departure from the country’s protectionist stance towards foreign investment, the country’s leader, Kim Jong-Un, called on his government to make economic revitalisation a priority in his New Year’s Day speech in January 2013.

The consultations could prepare the way for the country to attract inward FDI in 2013. A German business expert with links to the German delegation told FAZ that the government was well under way in devising plans to modernise its FDI laws. “There is a masterplan,” said the expert, who wished to remain anonymous. “It wants to open up this year.”


Rather than emulating China’s model of socialism “with Chinese characteristics”, which has seen China open up to FDI and enabled it to attract a wide range of investors, North Korea is instead said to be looking at following the Vietnamese example, with plans to cherry-pick specific North Korean companies as recipients of FDI, the German business expert explained to FAZ.

North Korea’s ailing economy, which was estimated to have grown by just 0.8% in 2011 according to South Korea’s central bank, is widely thought to have provided the impetus for Mr Kim to depart from the government’s hard line stance on FDI. As the country seeks to modernise its laws related to FDI, reports of a planned visit to North Korea by Google’s chairman, Eric Schmidt, signal that the country may have already begun courting investors.

While it remains to be seen just how far-reaching the government’s reforms might be, its new stance could enhance the country's lacklustre FDI performance. Greenfield investment monitor fDi Markets found that between 2003 and 2011, North Korea attracted a total of 15 greenfield projects, worth $1.7bn. However, capital expenditure into the country has been in decline in recent years, and fDi Markets data shows that FDI flows into North Korea hit a low of $58m in 2011, from a peak of $560m in 2007.